Telstra penalty termed 'parking fee'

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Primus Telecom has termed the amount which Telstra will have to
refund to wholesale purchasers of its broadband product "parking
fees."

The Australian Competition and Consumer Commission yesterday
reached an agreement
with Telstra, whereby the telco will refund $6.5 million to
wholesale customers affected by its pricing of broadband internet
services.

While commending the ACCC for "a genuine attempt to rein in
Telstra's anti-competitive broadband pricing conduct", Primus
Telecom regulatory affairs manager, Ian Slattery said in a
statement that the rebate could not deter anti-competitive
conduct.

"Given the damage that Telstra's conduct caused the industry as
it reaped outstanding benefits, the $6.5 million Telstra now has to
pay could be characterised as an excellent investment.

"This demonstrates the failure of the telecommunications
competition regime and the need for its urgent rehabilitation
before Telstra is unleashed as a fully privatised entity," he
said.

The dispute arose after Telstra offered pricing for broadband
internet access below the cost price it charged other
providers.

After complaints from these competitors, the ACCC found
Telstras $29.95 monthly offer was anti-competitive and issued
the Trade Practices Act notice, which carries a maximum penalty of
$1 million per day for as long as the infringement continues.

Optus corporate and regulatory affairs director Paul Fletcher
said the terms of the settlement were disappointing.

"In February 2004, Telstra used its privileged knowledge of the
start date of Optus' resale of DSL service to ambush Optus'
competitive entry - by announcing a sharp drop in its own retail
prices the day before Optus launched services," he said in a
statement.

"Yet under the formula agreed between Telstra and the ACCC,
Optus will receive a rebate which is just over 1 percent of Optus'
likely spend with Telstra on DSL in our current financial year.

"Given that Telstra's cumulative liability for fines under the
Competition Notice exceeded $300 million, it seems to have got off
remarkably lightly with a settlement of $6.5 million.

"So while the ACCC has done good work in the initial stages of
this dispute - being instrumental for example in securing
reductions in Telstra's wholesale price in March 2004 - the
ultimate resolution of this issue is disappointing. It does not
seem to be an outcome which will deter Telstra from throwing its
weight around in the future."

iiNet general manager (regulatory) Steve Dalby said the ACCC's
decision was welcome and it was good to see that in addition to the
financial penalties, the ACCC would require Telstra to give 15 days
notice before any planned price changes.

It was also encouraging that the consumer watchdog was examining
other ways in which the industry could be assured that competition
would flourish, he said.

"We're pleased to see the ACCC has recognised the damage caused
but the compensation payment only equates to about a week's credit
on our Telstra bill. Fortunately, the wholesale ADSL prices have
become less of a concern to us since we decided to migrate our
customers to higher performance services on our own network," Dalby
said.

"Now that Telstra is under the spotlight in this market, we are
looking forward to the ACCC giving their attention to Telstra's
line-sharing and unconditioned local loop services. This is where
the real competitive opportunities lie.

"Our objective is to challenge Telstra's dominance of the mass
market for both broadband and telephony. The government's
competition policy favours facilities-based competition and that's
where we're going."